Are Rio Tinto plc, Aviva plc and Coca-Cola HBC AG super income stocks?

Updated
Coca-Cola neon sign
Coca-Cola neon sign

With Aviva(LSE: AV) yielding 5.3%, it remains one of the highest-yielding stocks in the FTSE 100. As such, it's bound to be of interest to income-seeking investors, although some will be put off to a degree by Aviva's recent merger with Friends Life. That's because such a major merger brings with it significant risks that could cause Aviva's profitability (and dividend) to come under pressure.

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However, this risk appears to be fully priced-in to Aviva's valuation, with the life insurer trading on a price-to-earnings (P/E) ratio of just 9.5. This indicates that even if there are challenges ahead, Aviva's share price may remain resilient due to its wide margin of safety. And with Aviva's bottom line forecast to rise by 8% next year and the synergies from the deal being on track, it appears to have a very bright long-term future.

With Aviva paying out just 50% of its profit as a dividend, there's tremendous scope for a rapid rise in shareholder payouts. Therefore, it remains one of the most alluring income plays within the FTSE 350 for long-term investors.

The real thing

Also offering dividend growth potential is Coca-Cola HBC(LSE: CCH). It currently pays out just 46% of profit as a dividend and this indicates that there's scope for a rapid rise in dividends. That's especially the case since Coca-Cola HBC is forecast to increase its bottom line by 21% in the current year and by a further 11% next year. Not only does this mean that dividend growth is on the cards, it also means that investor sentiment could experience a step change over the medium-to-long term.

That's especially the case since Coca-Cola HBC trades on a price-to-earnings growth (PEG) ratio of only 1.6, which indicates that it offers upbeat growth at a very reasonable price. And while Coca-Cola HBC may only yield 2.5% at the present time, in the medium-to-long term, it could become a highly reliable and fast-growing dividend stock.

More short-term pain

Meanwhile, dividends at Rio Tinto(LSE: RIO) have been reduced recently as the iron ore miner seeks to shore up its financial standing. This is a sensible move since the resources market could experience further pain in the short run as the supply/demand imbalance that has pushed prices downwards look set to continue.

Due to the dividend cut, Rio Tinto is forecast to yield 3.6% in the next financial year. However, with the company's bottom line due to rise by 12% next year, dividends are expected to be covered a relatively healthy 1.8 times by profit. This indicates that they could rise at a rapid rate - especially if the price of iron ore remains stable. And with investor sentiment improving in recent months and Rio Tinto trading on a PEG ratio of just 1.5, now could be a good time to buy for income and growth investors alike.

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Peter Stephens owns shares of Aviva and Rio Tinto. The Motley Fool UK has recommended Rio Tinto. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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